Price Indexation Calculator (PPI)
Adjust B2B contract prices using Producer Price Indices (PPI). Includes 20 specific sectors (Energy, Metals, Logistics) for accurate commodity-based indexation.
About
Long-term commercial contracts often face the risk of value erosion due to fluctuating input costs. This Price Indexation Calculator uses the Producer Price Index (PPI) to adjust payments accurately, ensuring fairness for both suppliers and buyers. Unlike CPI, which measures consumer costs, PPI measures the average change in selling prices received by domestic producers for their output.
This tool is essential for procurement managers and suppliers negotiating multi-year agreements involving volatile sectors like Energy, Metals, or Logistics. The standard adjustment formula used here is Pnew = Pbase × (1 + PPIcurrent − PPIbasePPIbase). Correct application of commodity-specific indices prevents revenue leakage and contract disputes.
Formulas
The price adjustment factor is derived from the relative change in the selected PPI sector index.
The adjusted contract value is:
If the contract specifies a partial indexation (e.g., only 70% of the price is indexed), the formula becomes:
Reference Data
| Sector Code | Industry Sector | Base Index (2000) | Trend Volatility |
|---|---|---|---|
| PPI-NRG | Energy & Fuels | 100.0 | High (±15%/yr) |
| PPI-MET | Iron & Steel | 100.0 | Med (±8%/yr) |
| PPI-AGR | Agriculture & Grains | 100.0 | Med (±10%/yr) |
| PPI-LBR | Labor (mfg) | 100.0 | Low (±3%/yr) |
| PPI-LOG | Logistics & Freight | 100.0 | Med (±5%/yr) |
| PPI-CHE | Industrial Chemicals | 100.0 | Med (±6%/yr) |
| PPI-PKG | Packaging Materials | 100.0 | Low (±2%/yr) |